B249981 UNITED STATES OF AMERICA In The Matter of MARTIN ADVERTISING, INC., a corporation. DOCKET NO. C-3846 COMPLAINT The Federal Trade Commission, having reason to believe that Martin Advertising, Inc., a corporation ("respondent" or "Martin"), has violated the provisions of the Federal Trade Commission Act, 15 U.S.C. §§ 45-58, as amended, the Consumer Leasing Act, 15 U.S.C. §§ 1667-1667e, as amended, and its implementing Regulation M, 12 C.F.R. § 213, as amended, and the Truth in Lending Act, 15 U.S.C. §§ 1601-1667, as amended, and its implementing Regulation Z, 12 C.F.R. § 226, as amended, and it appearing to the Commission that this proceeding is in the public interest, alleges: 1. Respondent Martin Advertising, Inc. is a Delaware corporation with its principal office or place of business at 2801 University Boulevard, Suite 200, Birmingham, Alabama 35233. 2. Respondent, at all times relevant to this complaint, has provided advertising services to automobile dealers and dealer marketing groups, including but not limited to dealer marketing groups that promote General Motors Corporation ("GM") vehicles. Respondent has disseminated advertisements to the public that promote consumer leases, as the terms "advertisement" and "consumer lease" are defined in Section 213.2 of Regulation M, 12 C.F.R. § 213.2, as amended. 3. Respondent has disseminated advertisements to the public that promote credit sales and other extensions of closed-end credit in consumer credit transactions, as the terms "advertisement," "credit sale," and "consumer credit" are defined in Section 226.2 of Regulation Z, 12 C.F.R. § 226.2, as amended. 4. The acts and practices of respondent alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. § 44. FEDERAL TRADE COMMISSION ACT VIOLATIONS LEASE ADVERTISING 5. Respondent has prepared and disseminated or has caused to be prepared and disseminated consumer lease advertisements for motor vehicles, including but not necessarily limited to the attached Martin Exhibits A through D. Exhibits A and B are representative examples of respondent’s radio advertisements and are attached hereto in storyboard format. Exhibits C and D are representative examples of respondent's television advertisements and are attached hereto in video and storyboard format.
Federal Trade Commission Act Violations COUNT I: Misrepresentation of Advertised Transaction 6. In lease advertisements, including but not necessarily limited to Martin Exhibits A through C, respondent has represented, expressly or by implication, that consumers can purchase the advertised vehicles by financing the vehicles through credit for the monthly payment amounts prominently stated in the advertisements. 7. In truth and in fact, consumers cannot purchase the advertised vehicles by financing the vehicles through credit at the monthly payment prominently amounts stated in the advertisements. Each monthly payment amount prominently stated in Martin Exhibits A through C is a component of a lease offer and not a credit offer. Therefore, respondent's representation as alleged in Paragraph 6 was, and is, false or misleading. 8. Respondent knew or should have known that the representation set forth in Paragraph 6 was, and is, false and misleading. 9. Respondent's practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). COUNT II: Misrepresentation of Inception Fees 10. In lease advertisements, including but not necessarily limited to Martin Exhibits B and D, respondent has represented, expressly or by implication, that the amount stated as "down" or "cash or trade down" in respondent's lease advertisements is the total amount consumers must pay at lease inception to lease the advertised vehicles. 11. In truth and in fact, the amount stated as "down" or "cash or trade down" in respondent’s lease advertisements is not the total amount consumers must pay at lease inception to lease the advertised vehicles. Consumers must also pay additional fees beyond the amount stated as "down" or "cash or trade down," such as the first month's payment, security deposit, and acquisition fee at lease inception. Therefore, respondent's representation as alleged in Paragraph 10 was, and is, false or misleading. 12. Respondent knew or should have known that the representation set forth in Paragraph 10 was, and is, false and misleading. 13. Respondent's practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). COUNT III: Failure to Disclose Adequately that Transaction Advertised is a Lease 14. In lease advertisements, including but not necessarily limited to Exhibits A through C, respondent has represented, expressly or by implication, that consumers can purchase the advertised vehicles for the monthly payment amounts prominently stated in the advertisements. These advertisements do not adequately disclose that each advertised monthly payment amount is a component of a lease offer. 15. The existence of this additional information would be material to consumers in deciding whether to visit the dealership named in the advertisement and/or whether to lease or purchase an automobile from the dealership. The failure to disclose adequately this additional information, in light of the representation made, was, and is, a deceptive practice. 16. Respondent knew or should have known that the failure to disclose adequately that the advertised monthly payment amount was a component of a lease offer as set forth in Paragraph 14 was, and is, deceptive. 17. Respondent's practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). COUNT IV: Failure to Disclose Adequately Inception Fees 18. In its lease advertisements, including but not limited to Martin Exhibits A - D, respondent has represented, expressly or by implication, that consumers can lease the advertised vehicles at the terms prominently stated in the advertisements, including but not necessarily limited to the monthly payment amount and/or amount stated as “down.” These lease advertisements do not adequately disclose additional terms pertaining to the lease offer, including but not necessarily limited to one or more of the following charges: a required security deposit, first month's payment, and/or acquisition fee. 19. These additional terms would be material to consumers in deciding whether to visit a dealership named in respondent’s advertisement and/or whether to lease an automobile from the dealership. The failure to disclose adequately these additional terms, in light of the representation made, was, and is, a deceptive practice. 20. Respondent knew or should have known that the failure to disclose adequately material terms as set forth in Paragraph 18 was, and is, deceptive. 21. Respondent's practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). COUNT V: Consumer Leasing Act and Regulation M Violations 22. Respondent’s lease advertisements, including but not necessarily limited to Martin Exhibits A through D, state a monthly payment amount, the number of required payments, and/or an amount “down.” Respondent’s advertisements omit or fail to clearly and conspicuously disclose certain additional terms required by the Consumer Leasing Act and Regulation M, including one or more of the following terms: that the transaction advertised is a lease; the total amount of any payments such as a capitalized cost reduction required at lease inception; that a security deposit is required; and the number, amount, and timing of scheduled payments. 23. Respondent's practices violate Section 184 of the Consumer Leasing Act, 15 U.S.C. § 1667c, as amended, and Section 213.7 of Regulation M, 12 C.F.R. § 213.7, as amended. Credit Advertising 24. Respondent has prepared and disseminated or has caused to be prepared and disseminated credit sale advertisements (“credit advertisements”) for motor vehicles, including but not necessarily limited to the attached Martin Exhibits A, C, and E. Martin Exhibit E, a television credit advertisement (attached in video and storyboard format), contains the following statements:
Federal Trade Commission Act Violations COUNT VI: Misrepresentation in Credit Advertising 25. In credit advertisements, including but not necessarily limited to Martin Exhibit E, respondent has represented, expressly or by implication, that consumers can buy the advertised vehicles at the terms prominently stated in the advertisements, including but not necessarily limited to the monthly payment amount. 26. In truth and in fact, consumers cannot buy the advertised vehicles at the terms prominently stated in the advertisements, including but not necessarily limited to the monthly payment amount. Consumers are also responsible for a final balloon payment of several thousand dollars to purchase the advertised vehicles. Therefore, respondent's representation as alleged in Paragraph 25 was, and is, false or misleading. 27. Respondent knew or should have known that the representation set forth in Paragraph 25 was, and is, false and misleading. 28. Respondent's practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). COUNT VII: Failure to Disclose Adequately in Credit Advertising 29. In credit advertisements, including but not necessarily limited to Martin Exhibit E, respondent has represented, expressly or by implication, that consumers can buy the advertised vehicles at the terms prominently stated in the advertisements, including but not necessarily limited to the monthly payment amount and/or number of required monthly payments. These advertisements do not adequately disclose additional terms pertaining to the credit offer, including but not necessarily limited to a final balloon payment of several thousand dollars, the amount of the downpayment, and the annual percentage rate. The existence of these additional terms would be material to consumers in deciding whether to buy the advertised vehicle. The failure to disclose adequately these additional terms, in light of the representation made, was, and is, a deceptive practice. 30. Respondent knew or should have known that the failure to disclose adequately material terms as set forth in Paragraph 29 was, and is, deceptive. 31. Respondent's practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). Truth in Lending Act and Regulation Z Violations COUNT VIII: Failure to State Rate of Finance Charge as Annual Percentage Rate 32. In credit advertisements, including but not necessarily limited to Martin Exhibits A and C, respondent has stated a rate of finance charge without stating that rate as an "annual percentage rate," using that term or the abbreviation "APR." 33. Respondent’s aforesaid practice constitutes a violation of Section 144 and 107 of the TILA, 15 U.S.C. §§ 1664 and 1606, respectively, and Sections 226.24(b) and 226.22 of Regulation Z, 12 C.F.R. §§ 226.24(b) and 226.22, respectively. COUNT IX: Failure to Disclose Required Information Clearly and Conspicuously 34. In credit advertisements, including but not necessarily limited to Martin Exhibit E, respondent has stated a rate of finance charge, monthly payment amount, and/or an amount "down" as terms for financing the purchase of the advertised vehicles. 35. These credit advertisements have omitted or failed to disclose clearly and conspicuously all of the terms required by Regulation Z, as follows: the amount or percentage of the downpayment, the terms of repayment, and the annual percentage rate, using that term or the abbreviation "APR." 36. Respondent's aforesaid practice violates Section 144 of the Truth in Lending Act, 15 U.S.C. § 1664, as amended, and Section 226.24(c) of Regulation Z, 12 C.F.R. § 226.24(c), as amended. THEREFORE, the Federal Trade Commission this fourth day of January, 1999, has issued this complaint against respondent. By the Commission. Donald S. Clark SEAL: |